Iceland was discovered by Vikings in the mid-9th century, and the first permanent settlements were established a few decades later. Other than a few Irish monks in the early Medieval period, there were no previous inhabitants of the Island. Exiled from Norway, Ingolfur Arnarson was said to be the first permanent settler, and a statue honouring him overlooks over the grassy slope of Arnarholl in downtown Reykjavik. ( see photo above)

 

The people who settled the country were mainly of Norse origin, farmers and chieftains "fleeing [the] taxes and tyranny" of the Norwegian monarchy, although a substantial minority were Irish and Scottish, some of whom were brought as slaves acquired in raids. That being said, Iceland is said to be the first country in the Medieval / Modern period to abolish slavery (in 1117), which, at that time, was a practice widespread throughout Europe and the world. 

 

Indeed, as we will discuss in future articles in this series, 900 years later, in 2009, some commentators note that, by voting down a controversial bank "bailout", Icelanders once again escaped "slavery", this time in the form of "debt slavery".

 

Despite being a very small country in a remote location, the Icelandic people have achieved many things over the last 900 years and made important contributions to world history and culture. For example, in 930, they were the first country in Europe to establish a "parliament" (called the "Althingi"). The new society, which was dominated by a farmer / landowner elite, prided itself on sorting out its affairs through "jurisprudence and consensus decisions" among the Althingi representatives. One of the famous proto-democratic principles set down at the founding proclaimed that "Iceland is governed by laws not kings."

 

From the beginning, Icelanders were known for their seafaring abilities and adventurous spirit. They were the first Europeans to reach Newfoundland and North America in their "long ships", long before Christopher Columbus. They called the new land "Vinland", which may have been because of the "grapes" Leif Erikson and the Viking explorers are said to have found there (some today argue that "grapes" was a mistranslation of "Vin", and that it actually means "pasture-land"). Today, the "Sun Voyager", a spectacular ship-like sculpture fashioned out of stainless steel, sits by the bay in Reykjavik symbolizing the dreams of "hope, progress and freedom" of the original settlers of Iceland, and of Icelanders today. ( photo at right)

 

The Icelandic people were also known for their high levels of literacy, with many of the famous Nordic sagas of the Medieval period, which are still widely read today, composed by Icelandic authors. By the 18th Century, while much of the population of Europe, North America and the world, could neither read nor write, Iceland, astoundingly, had achieved almost universal literacy. Much later in 1955, as a reflection of Iceland's cultural advancement, Icelandic novelist Halldor Laxness won the Nobel Prize for Literature. Today, besides Icelandic, most of the people in the country are bi- or multi-lingual, speaking English, Danish and other languages.

 

But life was often difficult for the small band of people on this remote island in the earlier times. Iceland became a colony of Denmark in 1380 and for the centuries that followed suffered economic and political stagnation, as well as numerous natural disasters, including devastating epidemics and plagues, and a volcanic eruption in 1783 that killed a quarter of the population from the resulting famine. In memory of those darker times, "Brennevin", Iceland's signature alcoholic drink, a potent liquor distilled from potatoes and flavoured with caraway seeds, is nicknamed the "black death". 

 

Through all of these difficulties Icelanders persisted and survived. However, in the 19th Century, many were forced to emigrate because of increasingly bad environmental and economic conditions. Interestingly, the most popular country was Canada. In 1875, a group of immigrants settled in Gimli, on the shores of Lake Winnipeg in Manitoba, which came to be known as "New Iceland". Today, Gimli and district has the largest concentration of Icelandic population of any country outside of Iceland, and 88,000 Canadians count themselves to be of Icelandic descent according to the 2006 census. Many others, no doubt, have at least some trace of Icelandic blood running through their veins.

 

The 19th Century also saw the rise of the Icelandic independence movement which achieved autonomy from Denmark in 1904 and political independence in 1944. However, in 1949, despite strong opposition from many Icelanders, Iceland became a member of the NATO military alliance. As a result, American troops were based in the country and did not finally withdraw until half a century later in 2006.

 

In the 100 years since it established "autonomy", Iceland moved from being one of the poorest countries in Europe to a country with one of the highest standards of living and quality of life in the world. In the latter part of the 20th Century, it became a major exporter of fish, which abound in its waters, and, to a lesser extent, lamb and wool products. In the last couple of decades, it also developed a more diversified manufacturing industry, utilizing its extensive hydro-electric and geothermal energy to attract power-intensive industries such as aluminum and ferro-silicon smelting and, more recently, computer data storage and high tech industries. 

 

In addition, the people of the country built a Scandinavian-style social infrastructure, along with a modern service sector that included a comprehensive public health system and cheap post-secondary education. Unemployment was very low, as was the crime rate, and the life expectancy of Icelanders was long. All of this was accomplished, of course, through a lot of hard work, sacrifice, and innovation. Indeed, the workforce is well-educated and tends to put in more hours on the job per week than other Europeans.

 

Internationally, Iceland played a leading role in establishing the now widely-recognized "two hundred mile" territorial limits on fishing, as well as in key negotiations leading to the creation of the "Law of the Sea". It did so in the face of strong opposition from Britain and other powerful countries. 

 

By the early 1990s, Icelanders had much to be proud about in building their economy and nation, as well as advancing their culture and way of life. But there were those who felt much more had to be done, especially in the economic field. In part because of its small size, Iceland's economy had been plagued by inflation, and was vulnerable to currency volatility and fluctuations in export trade markets. Its banking sector was largely publicly-owned, conservative and inward focused; its companies were mainly Iceland-based and not multinational; and its stock market was still a fledging by international standards.

 

In 1991, a new government came to power with Prime Minister David Oddsson at the head. An enthusiastic supporter of the U.S. and NATO, Oddsson pledged to ramp up the Icelandic economy and further expand it into a globalized world. Influenced by the experience of "Thatcherism" in Britain and "Reaganism" in the U.S., the government turned away from Iceland's "egalitarian" traditions and the "Scandinavian welfare-state model", and embraced "free market reforms", which included large-scale privatizations, the "liberalization" of the financial sector from regulations, and the slashing of corporate taxes.

 

As Asgeir Jonsson, economist and banker, notes: "In short order, Iceland became the most pro-free-market economy in Scandinavia" (1). The reforms seemed to have a positive effect, with rapid expansion in various sectors of the economy, huge profits, and global wheeling and dealing. Nowhere was this more evident than in the newly privatized banking sector, which, in the course of several years, leaped far beyond the borders of Iceland to become an "international" player in the global financial industry. Some even went so far as to predict that Iceland's banking sector would transform the country into the "Switzerland of the North". If the world is a giant casino, why shouldn't Iceland's bankers be rolling dice at the table? After all, even if they had a losing streak, couldn't they just run up the tab like the London and Wall Street high-rollers were doing? At least, that was the thinking.

 

By the early 2000s, the economic and financial bubble looked as if it could expand forever. Life was good, especially for the rising Icelandic banking and corporate elite and their international partners in London, Zurich and New York. Deal-making was going on at a frenetic pace in boardrooms and candle-lit fancy restaurants. The thumping beat from Reykjavik discos could be heard far into the night. 

 

What could possibly go wrong? What could possibly go wrong, indeed.